Organizational Learning and Entrepreneurial Strategy

Abstract

Globalization, deregulation and new information and communication technologies (ICT) are having enormous effects on all types of business. Indeed, ICT are now adding two new sources of entrepreneurial business alongside start-ups and management buy-ins and buy-outs — rejuvenated established firms and downsized, out-sourced former larger businesses. Schumpeter's five key areas of innovation (drivers of competitive advantage and entrepreneurial strategy) have taken on a new resonance as ICT have added others such as supply chain management, market information, financing and distribution. Outsourcing and ICT have made economies of scale quicker and easier to achieve for SMEs, but deeper and more extensive knowledge is required of the capabilities of ICT and of potential partners. Economies of scope also require increased knowledge of internal organizational capabilities and of potential external partners. Various studies in the UK highlight the increased importance to entrepreneurial small firms of ICT-supported networking with other firms and of the organizational knowledge that lies behind successful strategies in these areas. Thus, the ability of individual owners and managers to learn and the capacity for organizational learning within an SME become crucial determinants of success in the new knowledge economy. This paper is based on an intensive study of organizational learning among the smaller members of the UK's Institute of Directors (IoD). It identifies different levels of organizational learning and the characteristics of SMEs at different levels, with particular attention to differences in business strategies. The findings of the IoD study are augmented by findings from the independent non-profit Small Business Research Trust (SBRT). SBRT has collaborated with the Open University Business School in studies on the determinants of management development in SMEs and has longitudinal data for analysing whether there is a connection between growth-oriented, innovative, entrepreneurial SMEs and their propensity to network, to use ICT and to support learning in their organizations. Exploring the linkages between organizational learning and SME behaviour, strategy and performance, the paper concludes with a typology of SME strategies related to organizational learning and suggestions for future research in this area.